A near monopoly: where do the world’s rare earths come from?

T

he energy transition relies on an ever-increasing supply of “rare earth” metals. These metals lie at the heart of the turbines inside wind, wave, tidal and hydroelectric power stations. Without rare earths, these power sources would be massively more inefficient, making the energy transition far more costly. 

While rare earths were not named due to their difficulty to find, few workable deposits of these metals exist. The rare earth metal supply chain has massive implications for the technologies that rely on them, and the countries that rely on these technologies. 

This supply chain also hides crimes and exploitation from the sights of its end users. The future of rare earths lies in washing these stains out of supply chains, although no organisation is currently quite sure of where to start. 

In 2021, China produced approximately 61% of all rare earth metal oxides. Most of these remained in the country, fuelling the country’s rapid electric vehicle switchover and renewable energy development. In 2019, total rare earth exports reached $155m according to the Observatory of Economic Complexity. In the same time, metallic magnet exports reached almost $2bn. 

European and American powers would love to diversify the supply chain away from China for political reasons. The EU’s renewable energy industry relies upon Chinese magnets, which account for 98% of all its imported magnets. The EU funds an industry body devoted to acquiring reliable, politically-aligned supplies of minerals, with rare earths as a priority. 

The US has put its hopes in developing a small domestic rare earth industry, which has seen some billion-dollar valuations for relatively small companies. The US has also looked towards neighbouring Canada for supplies, as the country opened its first rare earth mine last year.

However, these first projects aiming to develop an American market lag far behind China’s roaring industry. Besides this, Western nations simply lack rare earth deposits on the scale of China, Russia or India.

Because of this, Western nations have aimed to develop rare earth mining in allied nations. Greenland has felt the effects of this effort, as the country’s significant deposits of several rare earth metals become increasingly precious.

While Greenland is officially part of Denmark, residents have self-governance and a strong desire for independence in coming years. In Greenland’s 2021 elections, rare earth exploitation became a key issue, as the area’s 56,000 permanent residents looked towards potential revenue streams in future. 

The freezing, windy environment at the heart of the island makes mineral surveys difficult, so the exact quantity is not currently known. The cost and risk of mining any discovered deposits makes overcoming these risks unprofitable – unless prices continuously climb in coming years, as rare earths are expected to.

However, most voters supported the Inuit Ataqatigiit party, which objected to potential rare earth mining as well as current uranium mining in the country. 

Despite political difference, the current availability of Chinese rare earths keeps prices relatively affordable. In turn, this means that rare earth investment is still not magnetic enough for Greenlanders, but the pace of the energy transition means that this could change in coming years. 

Rare earths are generally mined as oxides and react with other elements to form stable compounds. Alone, rare earths demagnetise at extremely low temperatures and need active cooling to stay magnetic. However, rare earth alloys such as samarium cobalt, alnico or neodymium-iron-cobalt allow for most of this magnetism at more convenient temperatures.

Turbines and dynamos rely on magnets to convert motion into electricity, and stronger magnets allow more efficient conversions. Motors also use magnets to convert electricity into motion, enabling the electric vehicle transition. 

Rare earth magnets are many times more powerful than those made from more common metals. The strongest rare earth magnet can reach strengths of up to 10 times more than the strongest iron-based magnets. 

While Europe has little natural supply of rare earths, its large wind power companies give the continent a taste for the metal. Industry leaders Vestas, Siemens Gamesa, GE Renewable Energy and Nordex all operate from Europe, based in Denmark, Spain, France and Germany respectively. While these companies lead the market, only Chinese companies can match their wind manufacturing power. 

Countries such as the UK have made efforts to attract wind turbine manufacturing, but the specialist facilities required for turbine manufacturing seem mostly settled in central and western Europe. 

Most European companies do not process rare earths directly, instead buying rare-earth magnets directly from China. Germany imports the largest share of metallic magnets, followed by the US, although these include imports for electric vehicles and other industrial applications. 

This upstream processing of rare earths works in China’s favour, keeping renewable supply chains centred on the nation, thus maintaining diplomatic power. It also further obscures the origins of the metals, making the product easier to buy for wilfully ignorant consumers. 

Due to human rights abuses and slave labour in China, seeking ethically-sourced rare earths presents a challenge. 

Currently, rare earth traders can pay auditing firms to inspect the supply chain. Auditors will then certify where the goods came from and evaluate the conditions of workers in the supply chain. However, this system rewards auditors who offer cheaper and less thorough inspections, resulting in certification becoming less reliable. Some certificates can be directly purchased, bringing reliable certifiers into disrepute. 

Rare earths are not the only materials with opaque supply chains that hide possible exploitation. Minerals used in mobile phones, precious metals and gemstones all have notoriously muddied supply chains.

In some of these trades, companies have expanded vertically to bring all aspects of supply under their control. Given the closed-off nature of China’s companies and its political tensions, rare earth consumers do not have this option. 

In an effort to remedy this, the EU gave an undisclosed amount of funding to a blockchain-based certification scheme in February 2022. This would allow traders to individually log their involvement with the goods in a public and accessible way. The project, due to launch three years from now, has the backing of the Rare Earth Industry Association, of which the Association of Chinese Rare Earths Industries is a part. 

The designers of the Circular System for Assessing Rare Earth Sustainability hope that this will help it set a precedent for new international standards in rare earth trading. The system would forgo the adhering to the laws of any particular nation, overcoming concerns regarding which nation’s system takes precedence. 

However, there is no guarantee nations would accept the system. Any trade regulations imposed by a nation would mean more paperwork for traders. When asked if China would use the blockchain system, a spokesperson for the Rare Earth Industry Association emphasised to Reuters that members were free to adopt the system to their own satisfaction. 

Ultimately, Chinese rare earth producers have mastered the ability to keep unethical mining and manufacturing practices away from the eyes of their business customers, and the public who associate with them. However, as rare earth production becomes more critical to energy companies and transport, demand will increase. 

Currently, this seems likely to happen faster than suppliers can match, so public attention may turn toward rare earth producers later in the century.